Australian shares edge higher as banks overshadow mining losses

Oct 29 (Reuters) - Australian shares inched higher on Thursday, as gains in financials outweighed losses in heavyweight miners, while hot inflation data increased bets for a fifth central bank rate hike this year.

The S&P/ASX 200 index .AXJO rose 0.2% to 8,868.20 as of 0105 GMT. The benchmark ended flat on Wednesday.

Wednesday data showed higher fuel-cost-driven inflation accelerating in the third quarter, strengthening expectations of a rate hike at the Reserve Bank of Australia's meeting next week.

RBA Governor Michele Bullock said policymakers will weigh next week whether four rate hikes this year are enough to rein in inflation.

Markets imply nearly nearly 85% chance of a quarter-point rise at the central bank's November 3 meeting, up from 60% before the data was released. 0#AUDIRPR

Rate-sensitive financials .AXFJ rose as much as 1.3%, their highest since August 14. All the "Big Four" banks climbed between 0.8% and 1.3%.

Insurer Suncorp SUN.AX dropped 2.9%, after it lowered its gross written premium growth forecast for fiscal 2027 to about 3% from a previous outlook range of 3% to 5%. The stock is headed for its worst session in four weeks.

Energy stocks .AXEJ added 1%, tracking higher oil prices on renewed concerns about additional Middle East energy supply disruptions due to continued fighting in Yemen. O/R

Santos STO.AX and Woodside Energy WDS.AX advanced 0.6% and 1.1%, respectively.

Capping gains, miners .AXMM dropped 0.5%, with both Rio Tinto RIO.AX and Fortescue FMG.AX sliding over 0.6%.

New Zealand's benchmark S&P/NZX 50 index .NZ50 rose 0.3% to 13,729.59 points.

The central bank kept the cash rate steady at 2.75% on Wednesday. The Reserve Bank of New Zealand Governor Anna Breman said chances of a December cash rate hike are "high", but will depend on the economic outlook and how inflation is evolving.